Page 6 - Econogram 2018 Spring_SummerFINAL
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 Retaliatory Tariffs Could Cost Billi
In an ongoing tug-of-war over threatened tari s between the United States and the Chinese government, researchers at the University of Tennessee Institute of Agriculture (UTIA) have examined potential impacts to U.S. soybean exports at three hypothetical tari  rates. The research indicates that exports are projected
to drop by $4.5 to $7.7 billion if a 25 percent tari  is imposed, with even greater losses should a higher tari  be levied.
China plays a vital role in U.S. agricultural exports. In 2017, China accounted for 57.3 percent of U.S. exports including nearly $22 billion in U.S. soybeans. From 2000-2016, Chinese soybean imports increased from $2.3 billion to a high of $40.0 billion—an increase of more than 1,600 percent. This marked growth is largely attributed to China’s growing demand for livestock and feed products, as soybean imports are primarily used to produce soybean meal, a high-protein ingredient in animal feed.
However, U.S. soybeans face signi cant competition, particularly from Brazil. The U.S. was the leading supplier of soybeans to China for many years until being surpassed by Brazil in 2013. Brazil’s increased production and long-term growth potential coupled with infrastructure investment in partnership with numerous Chinese companies have facilitated gradual transition from the U.S. to Brazil as the largest source of China’s soybean imports. Tari  projections indicate that for every 1 percent increase in the price of U.S. soybeans, Chinese imports of U.S. soybeans decrease by 1.3 percent, while imports of Brazilian soybeans increase by 1 percent.
Soybean acreage has increased in the U.S. from 76.8 million acres in 2013 to 90.1 million acres in 2017. Likewise, U.S. soybean exports have also increased, with the exception of the 2017/2018 marketing year, and consistently account for about half of total U.S. production. In the past  ve years, farm-level production has been estimated at $40 billion annually.
The tari  situation is vastly important to Tennessee, which has 1.66 million planted soybean acres, making it the largest crop in the state. With a production value of $796 million, soybeans are also the state’s highest- valued agricultural commodity. Tennessee is ranked sixteenth in the nation for soybean production, and the crop accounted for an estimated 29.5 percent of all Tennessee agricultural exports in 2016.
U.S. soybean producers are reliant on foreign markets as a source of demand for their production. “China is responsible for nearly two-thirds of global soybean imports,” says UTIA professor and Blasingame Chair of Excellence Andrew Muhammad. “As such, if China places retaliatory tari s on U.S. soybeans, there could be profound implications for U.S. soybean exports and farm-level losses for U.S. soybean producers.”
The UTIA study, which was authored by Muhammad and his colleague Aaron Smith, considered trade projections based on three hypothetical tari  rates on soybeans, as follows: a 10 percent tari  is projected to reduce U.S. exports by $1.8 but could fall as much as $3.1 billion; at 25 percent, projected reductions are $4.5 to $7.7 billion; and at 50 percent, projected reductions are $9.0 to $15.3 billion.
If a 25 percent tari  is applied to U.S. soybean exports to China, UTIA researchers estimate potential farm- level losses could reach $0.33 to $1.76 per bushel. With higher tari s, the losses would be even greater.
“Tennessee soybean producers already face tight margins, and a reduction in farm-gate prices would add to their current  nancial strain,” says Muhammad. “Overall, Chinese retaliatory tari s on U.S. soybeans would have a considerable negative impact on U.S. and Tennessee soybean farmers.” However, Muhammad added that “projected losses for U.S. producers due to lower soybean exports to China could be partly o set by an increase in exports to other countries.” E
  6 Spring/Summer 2018

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